Commentary

Stuck on Empty

By Jerry Taylor and Peter Van Doren
This article appered on Nationalreview.com, February 3, 2006.
To the casual observer, one of the most striking things about President Bush’s State of the Union address on Tuesday was his wholesale adaptation of the Democratic party’s rhetoric regarding energy. Vowing to “move beyond a petroleum-based economy,” after all, is heady stuff and the sine qua non of the environmental Left. Careful viewers, however, will note that the energy initiatives forwarded in the speech amounted to little more than modest increases in the amount of money already going to programs in place. Veterans on all sides of the energy debate in Washington cannot fail to detect a strong whiff of political cynicism in the air.

Regardless, it’s remarkable for a veteran of the oil patch to echo the Left’s assertion that “America is addicted to oil.” It could be said, instead, that American consumers are inclined to use the lowest cost source of energy to meet their energy needs. Not to put too fine a point on it, but it’s ridiculous to call that sensible inclination an “addiction.”

The president is of course right to point out that a lot of oil comes from unstable parts of the world. Producer instability, however, is not necessarily a good reason to abandon oil. We can either have low-cost energy that occasionally spikes in price because of producer instability, or persistently high-cost energy that is less subject to disruption. It is not altogether obvious that the latter is economically preferable to the former.

President Bush began his energy riff by noting that since 2001, the federal government has spent nearly $10 billion on “cleaner, cheaper, more reliable alternative energy sources.” Perhaps, but what do we have to show for it? Nothing. The market share for non-hydro renewable energy (presumably what the president is referring to when he talks about “reliable alternative energy sources”) has languished between 1 and 3 percent for decades, depending upon how you define your terms.

Still, past spending was offered as a rationale for a 22-percent increase in funding for “zero-emission” coal-fired plants, solar and wind technologies, and nuclear energy. Fuel from corn, weeds, grass, mulch, trees, and whatever else the combines can harvest were also given a tip of the president’s budgetary hat. For the most part, everybody who’s already getting a federal energy handout will get a little larger sack of taxpayer loot if the president has his way.

Most annoying was the president’s contention that “we must also change how we power our automobiles.” Who exactly is “we”? Automobile engineers employed by automobile companies — not politicians employed by government — are the parties responsible for designing automobiles, and it should stay that way. Government funded R&D projects to redesign the power train are nothing new. Success in any one of them, however, would be.

The worst aspect of those programs isn’t just that they waste taxpayer dollars or that they subsidize research that should be paid for by auto companies themselves. Rather, it’s that they divert investment from more productive paths. For instance, while the Clinton administration was engaged in a similar undertaking called “The Partnership for a New Generation of Vehicles” and producing nothing of consequence, Japanese auto companies — without significant government help — were busy designing the hybrid powered engines that are now all the rage within the auto industry. Had Detroit not gone down the road paved by a government subsidy, it might be in a better position today to produce the kind of cars the president now hopes to subsidize.

According to the president, the ultimate objective of these subsidies is to “replace more than 75 percent of our oil imports from the Middle East by 2025.” But such a goal would be economically meaningless unless we completely isolated ourselves from world markets: no imports and no exports.

One might conclude that the president felt politically compelled to offer a lot of rhetorical nonsense about energy but is not inclined to back it up with any meaningful (read, “ruinous”) government action. Alternatively, one might conclude that President Bush embraces some very wrongheaded ideas about energy and is seriously deluded about what it might take to translate those ideas into reality. Neither conclusion, however, will give comfort to those who wish that some politician somewhere would make the case for allowing capitalism to govern energy markets.

Jerry Taylor and Peter Van Doren are senior fellows. Peter VanDoren is also editor of Cato’s Regulation magazine.